Inderes Oyj ($INDERES)

Welcome to today's presentation, where we have the pleasure to present Inderes. As we can see here, your first quarter results, we are going to run through and a little bit -- maybe run into the expectations for the rest of the year in your guidance. As always, we are joined by you, CEO, Mikael Rautanen from Inderes. For full disclosure, we need, of course, to mention that we are working together with you. We are using our system, and you also have a 20% ownership in HC Anderson. So let's get that full disclosure way. [Operator Instructions] But for now, I'll hand the call over to you, Mikael.

Thanks, Michael, and welcome, everyone watching online to the show. First quarter business review of Inderes. Let's dive in straight away. 4% revenue growth, within the growth, I would like to highlight that the growth came from the areas where we see growth in our strategy. So international revenue up by 15%. Recurring revenue accelerated the growth to 8%. We're seeing some signs of pickup in the research contract portfolio. I'm going to touch upon later on, and good momentum continues in the software sales, especially big milestone in the first quarter, we delivered successfully fully digital AGM for one of the largest and most widely owned companies in the Nordics. Extremely demanding and complex production that our team executed perfectly. I'm super proud of the team. It was a huge R&D investment also for us to build this capability and I think we have some quite unique capabilities now built, and we're pretty well positioned if the large companies start to shift towards digital AGMs in the upcoming years. So quite excited about that opportunity. And overall, the AGM season is going really, really well for Inderes. On the negative side, like last time we talked, we mentioned there's some pickup in the market conditions, some IPO activity coming in right now, the war in Iran and the -- well, the downturn or the bear market in small cap companies that's putting a bit of a shadow on the IPO activity. We did have one IPO successfully coming through in Finland. That's our customer as well. Now -- and we're seeing still good activity in the IPO pipeline, but of course, the market uncertainty might affect on will those will the companies decide to go through or still wait. But regardless of that, we'll continue executing on our strategy like we the external conditions are what they are, and we're pushing forward. I think the new strategy we announced last year has brought a lot of good execution power and focus to the operations now that we are more clearly structured into the three different business units, even software and research, each of them having their own international growth strategy. Profitability, 9% at the previous year's level. Diving into each business unit. On the Research business, contract portfolio up to 147, from 141 last year. We landed -- we're landing the IPO companies, especially in Finland with pretty good hit rate, I would say. So that's driven by the IPOs last year. In Finland, and then landing some new clients in Sweden as well. This is a really resilient business. What I'm proud of is that we continue -- even though it's single-digit growth, we continue to grow in this market, in this business in an environment where the market is declining and the -- and most of the research players in the commissioned research field are cutting down on their shrinking portfolios. What makes this market condition right now with the small bear market in the Nordics, I mean, First North Helsinki, First North Stockholm, down like over 60% from the 2021 heights. And they've continued to decline this year. Of course, like many small cap companies, they're seeing shrinking number of owners they're seeing declining share price, they're seeing lower liquidity on the share. Of course, the companies are like, how should I approach my Investor Relations in this environment, which is a very relevant question. Well, one thing is that the must-have products those are actually selling pretty well at the Inderes. So every company needs the press release system and IR website and needs to run AGM. So that part is doing pretty well. But of course, research contract is not a must-have for a publicly listed company. In our opinion, every like decent listed company should have some research coverage, but it's not a must have. So of course, that makes new sales more challenging, but I think the silver lining is, and this is something we have seen in the history that when a company become sufficiently frustrated that there's no liquidity on our share, no one is understanding our company. The pricing of the stock is whatever and the number of owners is shrinking. Usually, the question comes at some point like what should we do about it? And I think we have scientific proof that equity research is a good medicine to cure this problem. So that's something I think will eventually come. The activity on the Inderes community side remains good -- on a good level. Going to Events business, revenues stable, some timing effects on the AGM this year slightly weighted towards April compared with March. That's a small impact there. In Sweden, we did some restructuring last year to get us back on a sustainable growth path. Some positive signs there. We're building the capability to deliver larger scale event productions and also sales capability towards the large cap segment, something where we are strategy and tactic we really successfully implemented in Finland and something where we're seeking for growth in the future. On the AGM side, should the large companies and the AGM industry shift into more digital AGMs that might negatively affect our revenue, but on the other side, we're expecting it to contribute positively to our margins longer term because the digital AGMs do represent a higher-margin business opportunity for us, and in particular, the large cap AGMs, I think we have pretty unique offering within that sector that gives us a good competitive advantage in that product specifically. And then something to mention, like I think the Events business is pretty well positioned to the AI age because like this is this is like actual authentic personal communications. This is me speaking in a live event for the audience, this is real time. So I think like this type of content is something I believe investors will value also in the future when there's more and more like in personal and AI-generated content floating to the market. Software business, good momentum across all products. In the AGM part, we have planned some really, really good big logos as new customers despite already having extremely strong market position. So we're growing there. That's good. And also on other software products and the IR suite, bringing the full software offering together great feedback and the portfolio is developing really, really fast and the. And I mean, today, I think it's important to have great products but how fast your portfolio is developing and getting better and better every day with the AI, how fast we can develop this portfolio is just I think it's a fantastic time to be building a software business in a challenger position even though like -- well, the word software is not trendy term in the investor community right now, but I need to say that we're actually quite excited about this. Maybe we should -- I was half joking that we should change the name of this business to some AI something so that it would be more...

Yes. AI Agents, you decide.

Yes. But I mean, for us, I kind of like -- I want to remind that the philosophy here is that we're solving customer problems, like for example, an AGM is it's not a software product. What the customer is buying is to run their legal process in an efficient and trusted way through. And software is just one part of the equation. So this is, in a way, this is solving customer pain points with the combination of AI software. And then of course, there's some advisory part related to it as well.

I guess a lot of your product is highly regulated, right, the message you send her need approval by the stock exchange to kind of deliver those messaging and so on. And I guess AI is a low, I guess, if I should feel from my side, it's you don't want to make any mistakes, meaning probability that AI is running on, might not be enough to satisfy that should maybe be more deterministic with software. So yes, I get I guess looking from the outside, I would also say not one of the areas that is may be mostly completed or how do you see it.

Yes. But we can also make use AI to make this less prone errors and more trustworthy. We can make IR processes more efficient, but like practical example. If a customer uses our release distribution system and uploads Finish or Swedish or Danish release to the system and then the English version of the same release. We have an AI checking that there's no discrepancies between the languages. It's pretty simple feature that solves extremely relevant problem for the customer. So you can also use these technologies to reduce the number of errors, which is extremely important for the IR work.

And then I guess the year we should just take a question here regarding this suite. I guess one of the selling points to this is, yes, of course, it's nice for customers to have a full overview. But it should also make you potentially sell them more, right? Now we have a full overview of somewhat will be blocked because they haven't bought that product from you. I really want to have that overview and my total system integrated. Have you seen anything from customers implementing the IR suite and therefore, also wishing to have maybe the full product pallet from you. Have you started to see that? Or is that your expectations maybe that this could drive some growth?

Yes, we're seeing it's still early days. But yes, there's the -- of course, there's the convenience of having one supplier. There's the convenience of having everything under one platform. And then there's the convenience of these different solutions like interacting with each other. And through that, we can reduce a lot of manual processes related to the Investor Relations work.

So you also -- you will also be an API. You will not close out if some if they have some other competitive system, they can also be integrated into your IR suite. Should I understand it like that?

Yes. Yes. We're open to different partners. And in some areas, we're actually partnering with a lot of players in the industry, for example, in terms of bringing in compliance products to the suite or and different data feeds that are relevant for the clients. Okay. Going to the numbers. A bit more deep on the P&L. I mean no surprises here, pretty small changes on each of lines revenue up 4%, EBITDA up by 8%. So roughly on last year's level and cost structure on a fairly stable basis. Guidance for this year unchanged revenues to increase from last year, relative profitability, EBITA margin, excluding nonrecurring items, 10% to 13% background. We're still expecting slight pickup in the market despite the recent uncertainty. Profitability affected by seeing investments in the software part. That's where we're putting more resources into we've just strengthened the sales capabilities in that area and the full year earnings and growth slightly is expected to be weighted on the second half of the year. We have a seasonally strong Q3 usually. And as the recurring revenue base grows, that's more reflected on the second half. Yes. So then zooming out a bit to the bigger picture, what's up, what's next. First of all, AGM, we had last week, we had our AGM that was hybrid, so you could join online, of course. And then the AGM venue was one of the most iconic rock clubs in Helsinki called Tavastia. We had some 150 Inderes community members and shareholders joining was a good joy, good show and a good spirit dividend...

Promoting that it should only be digital.

Well, we're promoting Democratic Investor Relations. So you can join to our AGM also digitally or you can do. I think there's still value in face-to-face interaction with your shareholders and investors. Whether that happens in AGM or some other context, Capital Markets Days, other investor events that's, of course, there's so many different contexts where you can also have the face-to-face interaction like -- we're promoting digital but kind of like we're also -- we do understand that there is actually increasing value in face-to-face interaction. On the dividend, that's first part, EUR 0.22, second part to be paid in the second half, EUR 0.23. And as a reminder, we roughly cut our dividend to half compared to last year. And the other half, we're spending on share buyback program. And that's how we approach the our small cap sentiment that we've -- we are not immune to ourselves either. On the strategic development of the company, this is the big picture, how we're building the company where we're heading, starting with research. That's where we came from. What I want to say about the research, I mean, I'm proud that we've been able to grow the past years, even though it's been single-digit growth, we're still able to grow in the shrinking market. And then on top of the research business, since 2020, we've been building the Investor Relations product offering with IR events and the software offering. And I think we have some interesting possibilities within that market in the international context. What has changed since last year is that now these are all three quite different business models with quite different market dynamics as well. So we're split into three different business units, each of them having their own international expansion strategy that has brought a lot of clarity into the execution of this strategy. And thanks to the IPO, we've been able to like keep building this and invest in growth even though the Nordic markets have not been the easiest the past couple of years.

That's mildly said.

Yes. Well, from a Danish perspective, that's mildly said. But I mean, also in Denmark, I mean, HCA has been able to kind of like grow even in these years, I think it's really actually really well done because it's been such a horrible market in Denmark, but I hope the there's some IPO activity right in Denmark as well.

But as again postponed. Meeting more clarity on the market here.

Yes. Yes. But it's an interesting market. I mean Investor Relations product market is -- it's a young market that an international context is evolving and changing, which I think is good for us. And AI is changing the market, accelerating the change. It's changing how investors pick their companies. And that, of course, at least that is changing how companies need to do investor communications. And I'm quite excited because like it's pretty deep in our culture that leveraging new technologies to disrupt and challenge the status quo is something that is in the core of this company were curious and experimental, but at the same time, the team is very like down to earth on building new things. Like we don't go after shiny new things just to build new fancy tools that don't solve any like real problem, everyone is super focused on like what problem are we solving either for the investor or the company. I think that's a great part of the culture. And we -- through this, like we have a lot of AI-based applications features already out in the market that help both the IR and the investor side of the Inderes ecosystem. Of course, internal productivity, that's a given like just to stay in the game, you need to get these tools in use and improve your operations productivity. Short term, it is kind of like a challenge because you need to run your existing processes and ways of working while learning new and investing into new, so kind of like short term, getting significant productivity gains is challenging, even though we do have a lot of areas where we're already seeing significant increases in productivity. Face-to-face communications that I already touched upon. And yes, I mean, Inderes as a trusted brand trusted information source in the capital markets by the investors, I think we're quite well positioned because investors need -- they always have the question. Yes, I have these AI tools, but where is the data coming from? Can I trust the data and for that, I think, for example, this MCP server that we launched this week is something. I'm actually pretty excited about. So we're basically opening up the whole research database of Inderes for the AI tools that investors are using. So you can plug your Claude to the Inderes data and you can start building whatever you want on top of it. It has access to all the research reports, the event transcripts, forecasts, historical data, insider trading, the forum discussions that are quite rich at the Inderes forum and like people have been building already like really advanced stock picking screeners on top of the data and someone has built a stock picking retro game with Claude. So kind of like just to give you an idea, like users are already going crazy with this. I think this is something super interesting. We're kind of like we're changing the way investors are consuming research and kind of like from our client perspective, it's, of course, super critical that Inderes is producing quality trustworthy research about listed companies and then making that research available in the channels and in the tools that the investors are using, whether it's social media, whether it's Bloomberg terminal or AI tools or your local broker or local financial media. We need to be on those channels. And this is exactly at the core of it driving innovation and change in this industry.

Ahead of the normal bank system with analyst because that's still a closed wall, I guess, for the agents and the models running it -- or sorry, the AI model. So I guess that's keeping you still ahead of banks, right, the normal analyst departments, the need for actually feeding in information that's always has been behind the wall. I guess that is still true in this world.

Yes. I mean, like equity research being a PDF report sending over via e-mail feels quite outdated nowadays. All right. Just as an update on our strategy, we're here to democratize investor information by connecting investors and listed companies, bridging the gap between the two. There's all sorts of danger on the path between the listed companies and investors and Inderes is the guide between the two helping them to reach its summit.

Perfect. So we jump into some questions. What is the biggest risk to your business right now? Is it the technology changes or the stock market? Too big.

Which could I pick I mean, in kind of like you need to be always a bit paranoid. You need to be optimistic, but you also need to be a bit paranoid on the technology changes like because things can change so fast overnight, how can you stay ahead of the curve, make sure that your business is not being disrupted. So if I would have to pick on those, it would be the technology side. I think we're quite -- that risk is quite diversified because our business is actually quite diversified. It's not only based on a strong recurring base but research, events and software, they are all quite different business models in different markets, different dynamics.

What we call challenging Nordic market. So it must be the technology side that approaches maybe the biggest risk. And then in the market as you for 20 years, we know bad times will be followed by good time. So I guess that's also -- that you can never know technology. Yes. Has there been any changes to the competitive situation? Something new arriving, AI, trying to disrupt things in a more efficient manner that is always a threat to a large company. And no, I don't call your small cap, but in your certain field, you are a dominant player. So has there been any changes there. Are you seeing anything propping up?

In terms of AI, nothing kind of like within the markets where we operate, particularly nothing significant. In terms of competition, I think the kind of like events business in Sweden is highly competed and continues to be highly competitive even though it's been a declining market since COVID. But otherwise, no major changes in the competitive landscape.

And the final question, just to align, you're indicating that your margins will not move because you're investing primarily in the software business, but you're also talking about margins improving in the software business. Is that the gross margins and then it's the EBITDA margin? Just to -- so we understand a little bit better when you say software margins is improving, but you're still investing heavily and therefore, overall margins in the company is still expected not to show a massive improvement.

Yes, that's right. In the first quarter, software margins, yes, did improve, but on the EBIT level. And as it improves, that gives us more confidence and capability to invest into itself. So we're more looking for continuing the strong growth and momentum over like improving margins within the software in the short term.

And you're still indicating that phasing and you will be back-end loaded because if I looked, I guess, looking at your guidance, we can calculate it, you actually have delivered maybe 22% to 25% current guidance, that is in 1 quarter, you were saying it's back end loaded. I'm talking about the midrange of guidance. I am still expecting to be back-end loaded phasing income being higher in the coming quarters and will that be used for investments since it's not? It's on my own behalf, this calculation. I'm not asking to go after it. But I was still expecting earnings to kind of go up in the back end of the year?

We stick to our guidance, which states. So I think that's all I can say.

Yes, I didn't expect that to you. Good. Michael, I think that was it. Thank your sharing us your results and giving, I think, a nice overview on what is developing in our industry, the IR industry and so on, what is happening on the technology side and thoughts about how I can be used and how it could affect this industry. So thank you to you, Michael. Thank you for the audience listening in. Everybody, have a nice weekend. Bye-bye.

Thanks.